{ "episodeId": "SLP20", "speakers": { "stephan": { "name": "Stephan Livera", "role": "host", "tag": "STEPHAN" }, "stephan_livera": { "name": "Stephan Livera", "role": "guest", "tag": "STEPHAN" }, "guest_2": { "name": "Guest 2", "role": "guest", "tag": "GUEST" } }, "segments": [ { "speaker": "stephan", "time": "00:04", "start": 4.38, "text": "Welcome to the Stefan Livera podcast." }, { "speaker": "stephan_livera", "time": "00:11", "start": 11.18, "text": "Hey guys, welcome to the show. This is episode twenty, and I've got a really fantastic guest today. My guest today is Samson Mo. Welcome, Samson. Thanks, Stefan. Thanks very much for coming on, Samson. just to quickly intro Samson to any of the listeners who aren't aware, Samson is the C-S-O of Blockstream. He's also the C-E-O of Pixelmatic. He's 25% of the Magical Crypto Friends show, and he's well known for his humorous tweets, some of the debates he's had within Bitcoin, and he's also well known for being a deep strategic thinker and a business leader. So Samson, we've got a few topics on the agenda for today. There has been some recent news coming out of the Bitmain IPO. Now, Bitmain are a large mining company, and some of the recent news was essentially that they were, they are bag holding a large supply of Bcash at wit-- that they've sold their BTC for. So Samson, did you wanna give us a comment or an update on the latest with the Bitmain IPO?" }, { "speaker": "guest_2", "time": "01:19", "start": 78.98, "text": "Sure, I can try. I haven't been following it lately, for the last week or so, I've been bit busy. But, well, from the start, there were a few investor decks that were leaked out. There's actually three Chinese decks and one English deck. So they were circulating a lot of those around and, essentially misleading a lot of investors because, a lot of the people that they said had invested had actually not invested. And I guess in the last couple of weeks, a lot of that has come to light with a lot of, investors publicly disclaiming that they have anything to do with Bitmain's pre-IPo round at all. And I think the latest as of today is that, There, are some special purpose vehicles that Bitmain executives have, been putting together to gather investment and also take a cut. Personally, at least that's what I've seen on Twitter from, BTC King." }, { "speaker": "stephan_livera", "time": "02:22", "start": 142.38, "text": "Wow, okay, yeah, and it's, it's an interesting time because at this time, it seems that Bitmain are a very powerful player within the Bitcoin and other cryptocurrency mining. and Samson, I've seen you also comment on the competition and, you know, some of the failure to innovate within Bitmain. Could you maybe elaborate on some of that?" }, { "speaker": "guest_2", "time": "02:45", "start": 165.07, "text": "Right, so I think, a lot of people may not have realized it, but they're selling a two-year-old miner with, two-year-old technology. And that technology was actually created for them by Yang Jiaxing. He's the, CEO of, BitOway, it's the maker of the Shannma Miner, or it's also known as the Whats Miner. But, they haven't really created anything new in the last few years, and that's a major red flag for any company that is trying to IPO, at least in, in my opinion, because it's not showing that they have potential new revenue stream. I think they're, they're putting together a mining conference later this month and, they might showcase something new, but what I've been hearing, from my contacts is that they failed several batches of, Next generation ASICs, with TSMC, and I think the losses of that, those failures are in the billions, and they still have yet to crank out anything new. They, they do manage to tape out new chips, but then they're not efficient and defective, so they are generally waste inventory" }, { "speaker": "stephan_livera", "time": "04:02", "start": 241.87, "text": "Yes, so it's an interesting comment, and I think from what I understand, it's that they have lost some of their key talent as well." }, { "speaker": "guest_2", "time": "04:09", "start": 249.03, "text": "Yeah, so they lost Yang Guoqing, and they actually sued, him and Biteway over a patent. Over, I don't know how, how you'd even describe it, like, a, a frivolous patent for, serial DC connections, and Biteway actually invalidated that patent in Chinese courts. And, ASICPO, the Chinese patent office, essentially said, \"You can't patent something that's common knowledge.\" So they threw that out, and the lawsuit was thrown out as well. But it just goes to show, like, Bitmain's kind of, business, business ethics and business practices that a lot of people may not be aware of, and I think the IPO is great because it's bringing a lot of this stuff to light." }, { "speaker": "stephan_livera", "time": "04:55", "start": 295.27, "text": "yes, good points, good points. And I think the other thing is, many people have commented that, okay, Bitcoin mining is a little bit centralized. Do you have any comments in terms of what is happening now with bitminds competition and how that impacts Bitcoin's mining centralization?" }, { "speaker": "guest_2", "time": "05:14", "start": 313.55, "text": "So when people say Bitcoin mining is centralized, they're generally saying, you know, there's only a few mining pools. But within each mining pool, it's not like all the hardware is owned by any one entity. There are a lot of people in the pools, and there may be some mega farms, like large farms with upwards of, five hundred megawatts or Or, or about that, but, in general, each pool is comprised of a lot of, individual miners or conglomerates that pooled money together to start an operation. But it's not as centralized as people think it is, because you-- all you look at is a chart on a website and you think, \"Okay, that's one person controlling the hash rate.\" But if anyone actually did try to do something malicious with the hash rate of that pool, like say Bitmain wanted to use- The Antpool hash rate to attack Bitcoin, they would probably get an earful from their customers that are in the pool, 'cause they are accountable to those guys. So a lot of the, The posturing and bravado we saw during the debate, saying, \"You know, we have all this hash rate,\" is really just that they can't actually do anything with that hash rate in the pool, otherwise there would be lawsuits." }, { "speaker": "guest_2", "time": "06:33", "start": 392.92, "text": "the other thing I guess is that, there's upcoming competition, from eBanc and from Avalon. I think, those are the two main contenders to- Take down Bitmain's market position. And then Whatsminer, BitOway, they're also a strong contender too, because they, they have the guy that essentially made the S9 for Bitmain, and it looks like the, their next generation of miners is sixteen nanometers, but more efficient than seven nanometers, So, it doesn't look that great for Bitmain, and then you still have the traditional guys like, Bitfury and others that are still cranking out miners. But, I guess in terms of market dominance, there is, eBanc and Avalon with their pending IPOs as well, and if they can successfully raise on the public markets, it doesn't look that great for Bitmain." }, { "speaker": "stephan_livera", "time": "07:36", "start": 456.01, "text": "I like the point you make around the distinction between a pool and an actual miner, and that they are actually different entities or different individuals or companies. and I think the other thing to mention here is that there are different access- of mining decentralization, so people can speak in terms of decentralization, in terms of mining pools, decentralization in terms of companies designing and producing the mining hardware, and then there's also geographic decentralization, i.e. if it's spread around the world, it's harder to shut down. Do you have any comments in terms of what we might see for those other axes of decentralization?" }, { "speaker": "guest_2", "time": "08:14", "start": 494.21, "text": "Yeah. So that's actually a very good breakdown of, the layers of decentralization that you can have. And I, I think a lot of people may miss that nuance. but there's actually, an interesting point to be made here, which is a lot of the centralization in mining is engineered by Bitmain. So as you know, they have several mining pools, and they actually try to distribute, Their, their hash rate over these pools, so it doesn't look like they have, fifty percent of the hash rate. But they actually do try to keep people in their pools. They try very hard, so they, they have, one of the most popular miners, right, the S9, and for a long time, they would actually only sell to people if they would host that miner in their data centers, in their farms, and part of that condition is also to stay in their pools. So they're- We're actually trying very hard to centralize along those axes because it actually increases profitability. Because if you have, all the hardware in your pool, then, all the hash rate in your pool, then you're going to be more lucky than the rest. But to your point, I think, that is, those three, three axes are important. I think Bitmain is losing ground on all of them. We, we see Slush coming up in terms of, Gaining on hash rate in terms of the pool, and, we also have, miners moving out of China because, earlier this year there was, there was starting to be a crackdown on a lot of the more questionable mining operations, the ones that were taking government subsidies, and using them towards mining Electricity, and other things too, or just more shady operations, and a lot of those operations have now shifted, and a lot of miners in China have started to diversify too, just like in North America and other places. So I think overall, with the competitors on the hardware side and this kind of, a shift in dynamics of where it's safe to mine, we'll, we'll start to see a, a more healthy ecosystem." }, { "speaker": "stephan_livera", "time": "10:23", "start": 623.36, "text": "Yeah, that's a positive sign for the Bitcoin mining ecosystem. let's now change topics to the topic of cryptocurrency diversification. Now, within the traditional finance and investment world, the lesson of diversification is commonly taught. so Samson, can you elaborate on whether it makes sense to diversify amongst cryptocurrencies?" }, { "speaker": "guest_2", "time": "10:49", "start": 648.71, "text": "Yeah, so that's a, it's a funny thing where people are encouraging others to diversify within a particular asset class. So You, you can't really diversify into one asset class. It's like saying, \"I want to diversify from gold, \"and I go into other precious metals, right? \"Or, \"I want to diversify from real estate, \"and I go into, you know, I don't know, retail, small retail instead of commercial. \"But it, it doesn't really make any sense. But the reason I think people say that is because they look at cryptocurrencies like they're stocks, right? They look at coin market cap like it's, a Yahoo Finance, and they look at the logos and the names, they think each one is kind of a unique thing, but the, the underlying," }, { "speaker": "guest_2", "time": "11:35", "start": 695.14, "text": "the underlying truth here is that everything is really just a copy of Bitcoin. It's trying to be, A decentralized digital gold in, in their own different ways with some features. And I think, I forgot who, but they, they, they've, they've called, altcoins feature coins. So essentially they're Bitcoin with features. And that is really undifferentiated. And if you look at some of the data, I had a presentation in Korea where I collected some of the, the data, like all cryptocurrencies are highly correlated, And not correlated, exactly. So if Bitcoin goes up, a lot of them will go up, but when Bitcoin goes down, a lot of them will go down a lot harder. Like if you watch the markets, which I'm sure you do, you, you see like, you know, Bitcoin might come down ten percent one day and people say, \"Oh, that's so, so volatile,\" but then altcoins go down twenty percent. it's recently Ethereum like tanked twenty or thirty percent in one day. it's just much more brutal than the- The volatility is far more brutal than anything Bitcoin experiences, because those markets are incredibly thin. Like, you, you won't believe how, how little money you need to tank it or pump a lot of these coins." }, { "speaker": "stephan_livera", "time": "12:50", "start": 770.05, "text": "Yeah, I like the way you articulate that. I think it, it really is true that they're very correlated, and when, when Bitcoin drops, the altcoins drop even more, so, that's a phenomenon, and I think a lot of people now are starting to learn, that it's, it's a, it's a, it's a category error. They, they, they are looking at it, like you said, like it's a stock, when really you should think of it more like, this is something that's trying to become money, so to speak. And money is a- is a sui generous good. It's, it's, it's a very, unique thing." }, { "speaker": "guest_2", "time": "13:25", "start": 804.56, "text": "The bad thing is sometimes the-- you have the, those markets crash and the alts crash, but then one of the alts did well relative to Bitcoin. And then the, the The noobs will look at that and go, \"See, look at it. If you bought that, then you, you would have been safe.\" But that's just ignoring all the other market dynamics like market depth and liquidity, right? It, it could be a totally illiquid asset." }, { "speaker": "stephan_livera", "time": "13:52", "start": 831.56, "text": "Yeah, that's right. And I think it, it just, it just ignores all the network effects that are surrounding Bitcoin. Exactly. yeah. So I think the, that's, they're the key questions I had around, cryptocurrency diversification. So it was good to hit that topic. Well," }, { "speaker": "guest_2", "time": "14:05", "start": 845.0, "text": "the, the interesting thing would be The interesting thing would be, be actually to take a deep dive, like when I presented about, diversification, I showed, some stats. So if you just bought Bitcoin One year ago, you'd be up like fifty-some odd percent, but if you diversified into a basket like, the Coinbase index fund, then you'd be down-- you'd be up thirty-seven percent, but if you took Bitcoin out of that equation, you'd be like, in the negative. And then if you went into the top ten, top twenty, you'd be like in the negative in terms of gains. Yeah, I see. But it'd be interesting to see a monthly breakdown of those kind of stats and just see like on an ongoing basis how poorly are you performing and just have like a website that tracks this. And that would pretty much put an end to conjecture on if the diversification makes sense or not." }, { "speaker": "stephan_livera", "time": "14:58", "start": 898.19, "text": "Yeah, it's a good point you make around all basically the outsized portion of the gains are coming in Bitcoin and not necessarily in the other coins. It's almost like they are just riding the coattails of Bitcoin." }, { "speaker": "guest_2", "time": "15:11", "start": 910.64, "text": "Yeah, but people are selling, selling altcoins, right? Like Coinbase is a very strong proponent, well, I don't know about Coinbase, but at least Brian Armstrong is a strong proponent of Ethereum. So he has to try to make everything about crypto. everything is about a basket And having lots of different kinds of cryptocurrencies and, I heard for the ETF they're trying to file, it's like part of it is Ethereum. So there, there are motivations, and, you know, there are Ideologically driven reasons why people are promoting, yeah, yeah, that's right, as" }, { "speaker": "stephan_livera", "time": "15:46", "start": 946.08, "text": "well as some of the, fund managers who, you know, as, as we kind of s-speak about, they often have to try and justify their fee, and if they are literally just buying Bitcoin Not much of a justification, is it?" }, { "speaker": "guest_2", "time": "15:59", "start": 959.44, "text": "Yeah. Right. 'Cause if you could just buy Bitcoin and outperform the market, like, okay, this is assuming that you're not trading, right? You can trade a, a diversified portfolio of assets, right? And a lot of the traders do do that, but it's to get more Bitcoin. But when you talk about diversification, you're really talking about just holding. It's like a mutual fund or something where you just buy it and you don't touch it, right? And that's where you will lose for certain. But if that is Do you need to invest in a fund? And a lot of these fund managers have this thesis where, you know, we, you need us to help us help you choose those winners, and, you know, they'll, they're, they have to stick to their guns and say it's a, it's a good idea, right? They can't just say, \"Just buy Bitcoin.\"" }, { "speaker": "stephan_livera", "time": "16:45", "start": 1005.14, "text": "and it's interesting to see some of their opinions are turning a little bit as well. Don't wanna name specific names, but it does sound a little bit more like as some of the alts are Backward, sort of walk it back and sort of now pretend that they were into Bitcoin all along." }, { "speaker": "guest_2", "time": "17:02", "start": 1021.65, "text": "Yeah, I've seen some of that. I, I think it's going to progress as, as time goes on because, you know, you can't ignore historical data, that's the big thing. Like all the data's out there, a lot of people won't analyze it and dig into it for themselves, but all the data's out there, you can, you can actually make a really solid analysis just by publicly, using publicly available data." }, { "speaker": "stephan_livera", "time": "17:24", "start": 1043.5, "text": "yeah, yeah. Alright, well, I think that's, that's, that's it on, the cryptocurrency diversification. the next topic area was around blockchain technology, and obviously this is related more with Blockstream. So, Samson, there's been a lot of blockchain technology hype. People are just overhypeing it, and they are potentially using it where it isn't necessary or where it's maybe it's not the most cost-effective solution. So, could you comment on a little bit on that? And, you know, what scenarios does it make sense to use a blockchain? And where does it not make sense?" }, { "speaker": "guest_2", "time": "17:57", "start": 1076.58, "text": "So the way I, I approach this is like, why was Bitcoin created? And I, I think, a major reason is to eliminate the need for trust, right? The, the, the first message recorded in the blockchain is, you know, Chancellor on the brink of bailout, and that's just showing interference in the market. And the way that Bitcoin is designed is to minimize that interference and make it so that nobody has to really do anything or the, the protocol can't be changed easily, and you have this immutability and resistance to, meddling, so to speak. But When a lot of people try to say it's about the blockchain and not about Bitcoin, they kind of take away a lot of that, right? Like anybody could make a blockchain. You could make one, I could make one, but the question really is how How is it secured and what properties does it have, right? Like, you can have a blockchain and it could be, be running on two computers, and I think some of the, some of the funny contenders or wannabe contenders to Bitcoin say, you know, we can have gigablocks and gigabyte blocks, and they're running like three nodes in data centers, and they can get a gigabyte size block between them and sync, but that's not really practical, right? That, that doesn't lend any immutability. ability to that blockchain. And a lot of the enterprise blockchains are just focused on, you know, do you have a blockchain? And That's about it. They're not talking about how it's secured, how is it governed or not governed, right? These are the real big questions because if there are people that control the blockchain, it kind of- Kind of nullified the, the, the point of having a blockchain, which is that nobody can influence it or impact it." }, { "speaker": "stephan_livera", "time": "19:51", "start": 1190.94, "text": "So Samson, one of the things that we've-- one of the phenomena or the common things that we see now is a lot of large technology companies, or even large consulting or, you know, big four professional services type firms who are coming out and basically trading on their name and selling a blockchain product. Do you have any comments on that?" }, { "speaker": "guest_2", "time": "20:14", "start": 1214.22, "text": "I think it's pretty normal, like every business will try to look for something that is, hot and generating interest and try to monetize that. So as you mentioned, a lot of companies are trying to get into the blockchain space, right, and provide this kind of, enterprise blockchain service because everyone right now thinks they need a blockchain, but I, I think it's gonna pass as people learn what a blockchain is and what makes a, a blockchain actually interesting. but right now it's primarily a buzzword. I mean, you can, you can have a iced tea company add the name blockchain in their name and pump their stock price." }, { "speaker": "stephan_livera", "time": "20:53", "start": 1252.87, "text": "Yeah, yeah. So I think it's something that the market will just sort of learn over time, where are the appropriate times to apply this and where does it not really make sense to apply this technology? Yeah. Okay. And then, why Bitcoin?" }, { "speaker": "guest_2", "time": "21:07", "start": 1267.34, "text": "Well, Bitcoin is the only cryptocurrency or digital currency that actually- is immutable and outside of anyone's control." }, { "speaker": "guest_2", "time": "21:22", "start": 1281.85, "text": "a lot of people think, blockchain because of various reasons, but they kind of miss the point, like, why is, wha-why do we need a blockchain, right? And we need a blockchain to kind of, synchronize everyone across the network and synchronize the, the ledger for Bitcoin. But the purpose of doing that is that we have, A currency that's outside of anyone's purview or control. And if you just spin up, your own blockchain, then it's pur-- obviously under your own control. And if you want to extend that to like, why Bitcoin and not other coins? Well Most other coins have a, a, a figurehead or a company behind them, so they're really just companies, riding the wave, almost like companies are riding the blockchain wave, a lot of the other cryptocurrencies are riding the Bitcoin wave." }, { "speaker": "stephan_livera", "time": "22:17", "start": 1336.68, "text": "Yeah, yeah. Okay, so the next area I was keen to ask about is around some of the Blockstream projects. So let's start with the cryptocurrency data feed. Can you just give us a bit of a background on what's being offered?" }, { "speaker": "guest_2", "time": "22:32", "start": 1351.59, "text": "Right, so the data feed is, essentially just that. It's a feed from all the different exchanges that we have in the, in the project, and, we're essentially taking all their trade data and collecting it, and normalizing that data, which is then piped into ISIS network, and they resell that data to their customers. so essentially we're leveraging our relationship with all the exchanges, having built Liquid, Build a liquid network, and we sign up, sign them up, with commercial agreements so that we have a reliable source of data, and that's basically it. The point of the Ice, the cryptocurrency data feed is to bring more transparency to the market. So for a lot of traders, they, they need reliable sources of data for price discovery and just, just trading patterns, and they can run analysis on that. And there's really nothing very sophisticated or reliable on the market Market right now, except for this, data feed, at least I think so." }, { "speaker": "stephan_livera", "time": "23:36", "start": 1416.33, "text": "Excellent, excellent. So, it, it basically provides the benefit of the statistics, and so ICE, help Then selling that data on to other customers of their own, and those customers can then use the benefit of the statistics, the volume, volume weighted average price, turnover, that, those kinds of statistics." }, { "speaker": "guest_2", "time": "23:57", "start": 1437.33, "text": "Yeah, so the ICE, data services is actually a very massive business. It's like at least half the size of ICE, in terms of revenue generation. So there is a very big market for this kind of data and ability to get real time, Feed data from all the different exchanges and venues." }, { "speaker": "stephan_livera", "time": "24:16", "start": 1455.9, "text": "Excellent. Okay. so let's now go into the Liquid Network. So, Samson, could you please give us a, a background on what is the Liquid Network?" }, { "speaker": "guest_2", "time": "24:26", "start": 1466.0, "text": "So the Liquid Network is an inter-exchange settlement network. It's essentially a side chain that is, operated by exchanges, a federation of exchanges and financial institutions and, similar kind of companies. But the goal is that it can move Bitcoin very rapidly, large blocks of Bitcoin through this network. So it's enabling faster trade, improved security, in- By reducing custodial risk on both sides and just allowing traders to take advantage of arbitrage opportunities. And now we actually have a, a new feature in Liquid which is called issued assets, which allows any party to, any party in the network currently to issue a token essentially. And it's more secure than Ethereum because you don't have to write a smart contract, it's just basically an RPC call that says issue token, and then you can have this token." }, { "speaker": "stephan_livera", "time": "25:25", "start": 1525.22, "text": "Okay. Yeah, cool. And so I think it's, it'd be interesting to distinguish there. So Lightning Network is something that is used for small transactions, whereas I believe the-- I understand the intention with Liquid is that it's, it can be used for larger transactions amongst what we're talking here is more like exchanges, large trading desks." }, { "speaker": "guest_2", "time": "25:47", "start": 1547.26, "text": "Yeah, so the Lightning Network is conceptualized basically to do small payments or micropayments or even nanopayments, like Satoshi level payments. And it's, it's always been the design for that. Like if you want to have massive volume for payments, there is no blockchain In the world that can, can have that throughput that you need, but with the Lightning Network, you can have five hundred transactions per second per channel. So if you have thousands or Tens of thousands of channels or hundreds of thousands eventually, then essentially the capacity is unlimited. It's just, it'll just scale as needed. for, also for Lightning, it's also a, a hot wallet, so you always have to be online with your, with your Bitcoin, connected to the internet. But for Liquid, you can actually have, both hot and cold wallets, so you can manage your Liquid Bitcoin, we call it L-B-T-C, in cold storage as well. And we've got some interesting ways to actually move coins into the network From cold storage very rapidly as well. So as you've mentioned, it is a method for, you know, institutions, trading desks, or traders to move large blocks of Bitcoin very rapidly in this network." }, { "speaker": "stephan_livera", "time": "27:02", "start": 1621.74, "text": "Yeah, yeah. And from reading the website, it mentions interchange settlement lag. So Samson, could you just outline what that is and why, why it matters?" }, { "speaker": "guest_2", "time": "27:14", "start": 1633.58, "text": "Right. So, I, I guess the simplest way to explain it is like, if you are a trader and you move some coins onto, to trade, you have to wait for a confirmation or six confirmations, right? And that time is essentially highly variable. It, it really doesn't depend. Like, a lot of people think that every ten minutes we get a, a, a Bitcoin block, but that's not the case. In one minute, it's possible to get three blocks, or it's possible to go one hour and get one block. And that's just Bitcoin operating very normally. It's just, i-it's just a random distribution, and it's var-base, it's variant, variants. So with, Liquid, essentially you have set block times. So Liquid has, one minute block times. So essentially you have full settlement in roughly two minutes, depending on when your transaction hits the block. And that just reduces that, that inter-exchange settlement lag. So if you're moving money from one exchange to another, you know that it will- Settle in two minutes versus, anywhere up to an hour." }, { "speaker": "stephan_livera", "time": "28:17", "start": 1697.3, "text": "Right. Yeah. And from my understanding then, a trader or a large desk may have balances on across different exchanges, and this is one way, once, once the product and the service is fully operational, that they could quickly manage their assets across different exchanges to help them manage their" }, { "speaker": "guest_2", "time": "28:39", "start": 1718.88, "text": "trades. So a lot of traders actually will spread out, their funds on many exchanges, just to, so they're ready to t-take advantage of, opportunities. But with Liquid, you could actually move very rapidly. You could keep everything on one exchange and move it to the next one, i-in exchange in this network in about two minutes, and that's full settlement on the Liquid blockchain. So it, it, it opens up new ways to take advantage of, trading opportunities, and I think it'll bring some more- efficiency to the market. We're just missing the rail back right now, like right now you can transfer Bitcoin very rapidly, but you still need to come back if you're arbing. So you, you need some kind of tokenized fiat currency or other coins. So that's probably the next step for us to have that full loop. But once you have a full loop, then you could, You could essentially do automated trading, and that should actually bring about better stability in terms of price, for different exchanges. Oh, fascinating. Okay, so" }, { "speaker": "stephan_livera", "time": "29:43", "start": 1783.18, "text": "something like a Tether, right? Potentially. Yeah. Okay. And, so the other thing that's interesting about that, and I think you might have commented on this before, is around how the increased- You know, use of these technologies such as Liquid can actually help regulators gain confidence in the market or the price discovery, and as such, they may then be more inclined to approve things like a Bitcoin ETF. Did you want to elaborate on that?" }, { "speaker": "guest_2", "time": "30:15", "start": 1815.08, "text": "Sure. So one of the comments I think, for the Winklevoss ETF was that, Bitcoin markets are prone to, prone to manipulation or the market depth, the liquidity is not, not great. So it's It's easy to manipulate, but if you have, a network like Liquid in place and you're linking together a lot of the major exchanges, it's much harder for any one party to manipulate the price, because that will be evened out very quickly by people trying to arbitrage. So essentially, you'll try to push the price up on, you know, exchange X. hope there's not really an exchange called exchange X, but someone's trying to push, push it up on exchange X, and then, you know, traders will just arbitrage with exchange Y. And And that will mean that your efforts are wasted essentially." }, { "speaker": "stephan_livera", "time": "31:08", "start": 1868.03, "text": "Yeah, yeah. Okay. And then, so with the liquid network, what's the security model?" }, { "speaker": "guest_2", "time": "31:15", "start": 1875.34, "text": "So it is a federation. we have a white paper called Strong Federations, it's essentially detailing how we, we would secure, a federated sidechain. so essentially the security is distributed amongst the signers, the federation, we call them functionaries. so they are essentially signing the blocks and extending the liquid blockchain. So you're relying on them to not collude against you. And the thinking is that they themselves, the exchanges, have to peg in Bitcoin to get LPDC in liquid. So they're, they're extremely disincentivized to attack the network or, or even to collude because they would essentially- Be attacking themselves and their own customers. I see, I see. So from a, a user perspective, you, you traditionally you trust one exchange, so you will put your coins on one exchange and it's a custodial solution, right? They, they're holding onto your coins for you and you can trade and you remove them when you're finished. But for Liquid, if you're holding LBTC, you convert at the, at the exchange from BTC to LBTC, well, you're trusting that the entire federation is, is going to exist. So even if- If you converted from, Bitcoin to LBTC on Exchange X, you're not relying on Exchange X, you can take them off of Exchange, hold them in a wallet, and then move them to any other exchange to cash back out to BTC because of the one to one peg. And that just means that, you know, you're not prone to any one exchange going down." }, { "speaker": "stephan_livera", "time": "32:47", "start": 1966.51, "text": "Yeah. And so my understanding is it's two thirds of the, federation or of the, of all the functionaries who are, you know, the exchanges and the desks who are part of" }, { "speaker": "guest_2", "time": "32:56", "start": 1975.97, "text": "Liquid Network? Yes, that's right. So you-- we need two thirds online to extend the blockchain, and to attack the network, two thirds would have to all collude to do so." }, { "speaker": "stephan_livera", "time": "33:06", "start": 1986.48, "text": "I see. And then if a trader or a person has pegged in bitcoins from the main Bitcoin blockchain into the liquid side chain, that's basically the security model then that it would ne-- it would require two thirds to try and steal that person's Bitcoin, let's say." }, { "speaker": "guest_2", "time": "33:24", "start": 2004.1, "text": "Correct. But there is actually a hardware component to Liquid, so it's, it's, it's a theoretical attack that it's not that easy to execute, because these are essentially black boxes that the exchanges can't tamper with. So they, they, they can't actually censor transactions or do anything. The, these, the functionary boxes are just plugged into a data center and they just sign blocks. So it would be extremely hard for them all to collude and modify the hardware to attack the network." }, { "speaker": "stephan_livera", "time": "33:56", "start": 2035.69, "text": "I see, I see. Okay. Yeah. And then how many participants are there in the liquid network at this point?" }, { "speaker": "guest_2", "time": "34:02", "start": 2042.29, "text": "So we have about twenty-one right now, and I think at the time of launch, we should have a few more on top of that." }, { "speaker": "stephan_livera", "time": "34:11", "start": 2051.02, "text": "Okay, excellent. And then, what are the typical types of companies signing up? Are we talking banks, exchanges, brokers?" }, { "speaker": "guest_2", "time": "34:20", "start": 2059.62, "text": "Right. We haven't announced the list yet, but there are a lot of very big exchanges, there are some actually large wallets, and there is one bank actually in the network and some other, financial institutions that want to issue assets. Right. Yeah, it's an interesting space. Sorry, and market makers too." }, { "speaker": "stephan_livera", "time": "34:41", "start": 2081.25, "text": "okay, yeah, yeah, makes sense. Yeah, it's an interesting space because it's almost like you can see there are some, you know, quote-unquote, crypto companies who are trying to go more traditional, and at the same time, you've got some, you know, quote-unquote, traditional finance companies who are trying to go crypto, and they're sort of trying to almost meet in the middle." }, { "speaker": "guest_2", "time": "35:01", "start": 2101.31, "text": "Yeah, so Liquid is a great way to meet in the middle. It's a common carrier that they can all use." }, { "speaker": "stephan_livera", "time": "35:09", "start": 2108.94, "text": "yeah, yeah. Okay. And then what is the revenue model for this service? Is it, is it subscriptions or what is it?" }, { "speaker": "guest_2", "time": "35:16", "start": 2116.48, "text": "So we, we take, we have a support agreement with the federation member, so we are essentially a technology provider and they pay us some monthly fee to maintain and support the network. I" }, { "speaker": "stephan_livera", "time": "35:29", "start": 2129.05, "text": "see, I see. So it's, so it's basically support being provided by the Blockstream engineers." }, { "speaker": "guest_2", "time": "35:35", "start": 2134.76, "text": "Yes, that's right." }, { "speaker": "stephan_livera", "time": "35:37", "start": 2136.68, "text": "Yeah. And then in terms of the model going forward, it seems to me that, you know, you're trying to really build an ecosystem out here, and then the idea is that Blockstream would build an expertise or has the expertise in applying these technologies, such as, you know, confidential transactions to blind the amount or confidential assets. And that, you know, as you sort of build out the ecosystem, that's, that's kind of the model. Is that, is that the vision or what is the strategy there?" }, { "speaker": "guest_2", "time": "36:07", "start": 2166.8, "text": "Well, we, we do have a very strong R&D team, research team, and, you know, a lot of these things come out of that, that team, and we do want to, you know, commercialize all of these technologies in ways that will benefit the greater ecosystem. So like, like, confidential transactions is one of those things that, that we, we created in R&D, and it is a part of Liquid. Maybe someday it'll be a part of Bitcoin, but at least for Liquid, that the network can benefit from that, innovation because all the transactions in Liquid are confidential, so you can, essentially cancel out front running. There, when you move exchanges from exchange X to exchange Y, no one can watch and see how much you sent over there. they can't expect, you know, they can't predict market conditions, they can't see, oh, you're sending, ten thousand bitcoins to, Bitfinex, there's gonna be a big dump, right? So it essentially makes it a much more fairer market in that regard. And this also applies for tokens that are issued in Liquid too. Those, those are also confidential transactions. So, the issuance of tokens, is open, but the transfer of tokens is confidential. yeah. Okay." }, { "speaker": "stephan_livera", "time": "37:23", "start": 2243.35, "text": "Yeah, I think that's an interesting vision. So if we were to sort of project out years into the future, if, if Liquid plays out as, you know, as you hope, then the idea then that Liquid can help Kind of power the financial system with Bitcoin as the settlement currency. Is that the kind of vision you're looking at?" }, { "speaker": "guest_2", "time": "37:41", "start": 2261.16, "text": "Yeah, well, we think, a lot of us at Blockstream, we think that Bitcoin is the real innovation here. So we want to build things on top of Bitcoin, like taking advantage of, of Bitcoin's immutability and security, and, adoption, right? So Liquid will just help with Bitcoin adoption, right? You have all this tech, all these transfers and tokens that are, you know- Essentially tied to Bitcoin in some way. So for Liquid, the, the way you move tokens around the network will be in LPTC, compared to with Ethereum, you use Ether to move tokens. So we're kind of anchoring things back towards Bitcoin." }, { "speaker": "stephan_livera", "time": "38:21", "start": 2300.57, "text": "yeah, I like it's an interesting model. it's very fascinating to see how that develops out. so I think the next thing I was keen to ask you about is, there's obviously one of the coming- Battles potentially is around privacy in Bitcoin. So part of, I guess, just to outline the thoughts, it's potentially making Bitcoin more private and more fungible may Also kind of go or conflict against a desire by, say, governments and regulators who might not necessarily want there to be that level of privacy available on Bitcoin. So, my question then is, do you have any thoughts on how that could play out, Samson?" }, { "speaker": "guest_2", "time": "39:10", "start": 2349.83, "text": "It, it, it's going to be interesting, I think. You know, Bitcoin isn't fungible right now, right? We-- and there, there's not much privacy, and the problem with that is it's not evenly distributed, right? Some people might expect it to be, but it's actually not. Some people may be very technical and are able to obfuscate themselves and maintain a higher degree of privacy, but I think in order for Bitcoin to be, you know, really digital gold, you have to have that Fungibility, and to, to really take advantage of its, properties as information, it needs to be, private, and that, I think those are very important for anything that wants to be money, well For Bitcoin to become like a, a world money, i-it's kind of a, it's kind of an interesting position that, the government doesn't like. But may not like, privacy and fungibility because it's actually beneficial for people, right? Anytime there are backdoors and things built into, you know, anything, someone, someone will, will find a way to breach that, right? Like, the, the best way to have privacy is to not build anything in or to eliminate the possibility for anyone to Engineering some, in-engineering something into it later on. So I, I think, just to make sure that the people are better off, like in every country, you should be promoting that Bitcoin is private and fungible." }, { "speaker": "stephan_livera", "time": "40:53", "start": 2452.67, "text": "yeah, yeah. Yeah, so it'll be an interesting one to see how that one plays out as well. the other one that is, interesting area and, and is where we're, we're kind of, we're unknown on how this will work out is the coming fee market in Bitcoin. So for, for a long time, we've been, you know, making use of the block subsidy, and eventually, at some point, we'll have to-- the, the whole ecosystem will have to transition into a fee market You know, whether that's through all the Bitcoin on-chain transactions and then also all the transactions that are still on-chain but associated with things like Lightning. So, do you have any thoughts on how the fee market could develop?" }, { "speaker": "guest_2", "time": "41:34", "start": 2494.36, "text": "Well, I'm probably gonna get dinged for this, but I think fees will just go up over time as adoption goes up, right? It's, i- either you believe that block space is valuable or you don't. There, there is no, there is no middle ground there. If block space is valuable, then as people want more of the block space, then the fees will go up, and that's just a property of the system. I, it's like going into, communism or extreme socialism if you think that the fees have to be a certain price, right? That's like saying, you know, all, all food and, cost, and the things you use to live should be a particular price and not move with the market. You know, you're against market dynamics or the free market." }, { "speaker": "stephan_livera", "time": "42:24", "start": 2544.18, "text": "and I think the other point to make there is it's around choice as well. So it's not that, you know, for example, you can put in a transaction and set it lower priority and therefore pay a lower fee, whereas people who really want that into the next block, well, obviously they pay a higher fee. So there's a bit of choice in that" }, { "speaker": "guest_2", "time": "42:43", "start": 2563.06, "text": "Yeah, that's a very common argument that, you know, the fees are too high. But you're right, like it's-- you can pay for, you can pay lower fee to be confirmed later if you're not in a rush. I think it's compounded by the fact that people think that Bitcoin is designed for payments, but if you look at the overall architecture of the system, it's not designed for payments at all, right? We have confirmation times, and that pretty much rules it out. And you have variants for block times, so i-it's really a horrible system for payments. But yeah, if you wanted to use Bitcoin for payments, then yeah, you would want to always to be confirmed right away. But if it's just a settlement system, then it doesn't matter when you settle, because any settlement in Bitcoin is gonna be faster than any settlement in any banking system currently." }, { "speaker": "stephan_livera", "time": "43:34", "start": 2614.24, "text": "yeah, insightful comment there as well. And I think the other point that maybe is worth discussing is that there will be different models. interacting with Bitcoin and Lightning, you know, there may be some people who want to do everything on chain with a full node, and then there may be others who are more happy to use a hosted wallet. There may be others who want to use a multi-signature solution. a-and maybe in the future there will be, you know, retail banks who run your wallet for you, but there's some kind of multi-signature setup that you hold some of the keys and they hold some of the keys. Y-y-you know, I think there's many different ways that it could all evolve." }, { "speaker": "guest_2", "time": "44:12", "start": 2651.59, "text": "Yeah, well, I think, I think a lot of people fail to realize that this is still very early days for all this technology, Bitcoin included. And I think ultimately how it's going to evolve is that you just won't care. Your wallet will take care of all that for you. if you're doing a large transaction, it'll send it on chain for you. If you're doing a small transaction, it'll send it through Lightning. And the thing that people don't understand is that you can make a on-chain transaction and open a channel at the same time. It's just Very mature at this point where we can do that very easily, but eventually, you know, you might make a large transaction and the change will just open up into a Lightning channel, and then smaller transactions will be pushed through that channel. But it's going to be-- eventually, it's going to be as easy as just, you know, using any app on your phone." }, { "speaker": "stephan_livera", "time": "45:00", "start": 2699.57, "text": "Yeah, I like that point you make around, particularly around You know, abstracting away some of the complexity, and particularly it was an interesting one you mentioned there about using the change, to open a Lightning channel at the same time. It's very, efficient or very, optimal use of blockchain space. So that's a clever idea. Hopefully, there might be some development on that. okay. And then, so I think just more broadly, do you have any other comments in how you see the Bitcoin space evolving over the next year or so? And a few examples would be Lightning deployment, ETF, privacy advances, liquid network launch, or the merging, you know, quote-unquote merging of traditional finance and crypto companies?" }, { "speaker": "guest_2", "time": "45:43", "start": 2742.72, "text": "Well, I think a lot more companies will get into the space. it just takes time for people to learn what Bitcoin really is, and once they understand the value proposition and a lot of the hype around, blockchain and, a lot of the feature coins is gone, then I think people will come in, in droves, and, you know, it, it'll push hyperbitcoinization, into reality." }, { "speaker": "stephan_livera", "time": "46:09", "start": 2768.82, "text": "Excellent. and I, I think an interview with you wouldn't be complete Complete without discussing your hats, Samson. So what is, so just for anyone who's new, Samson, sells hats. So you've gotta definitely check out his store. The, the website for that is Excelion, so that's e x c e l l i o n. So Samson, have you got, any plans coming for the hats?" }, { "speaker": "guest_2", "time": "46:32", "start": 2791.86, "text": "Yeah, so I have the Reckless Hats. I just need to find some time to put them onto the store, but they're at the fulfillment company, so they're ready to go. Also have a, a Phoenix Den hat that I promised Charlie that I would make. So, you know, there's the Dragon's Den for Bitcoin. Yeah. So they have, Litecoin has the Phoenix Den. Those are, I think, those are going out at, Litecoin conference. So I, I sent a bunch to San Fran for that conference, and, I'll put them up on the store as well. But in general, I think the store is just going to have more and more hats, and I'm thinking about doing some stickers too, be-cu-because" }, { "speaker": "stephan_livera", "time": "47:09", "start": 2829.18, "text": "those seem to I thought it was fascinating how quickly it, it works, and I definitely would be keen to get, the, the white Reckless hat. I saw some of the guys at Full Mo had that. Yes, yes. Yeah, we'll, we'll send you one, we'll send you one. Awesome, awesome. and you've also recently launched a blog at, samsonlivera dot com." }, { "speaker": "guest_2", "time": "47:32", "start": 2852.34, "text": "Yeah, so I've had some feedback that a lot of my tweets are, are, are decent, but they would be better in long format or, you know, fleshed out a bit more. And, I think starting a blog would be good. It might force me into writing. Excellent. No, I" }, { "speaker": "stephan_livera", "time": "47:50", "start": 2869.99, "text": "think it'll be, I don't think it'll be good. Looking forward to seeing some posts there. okay guys, so I think, we're, we're pretty much, time to wrap up. So I'll just mention all of Samson's, accounts and, and media. So definitely look him up on Twitter. His account is Excillion, E X C E L L I O N. and obviously the website samsonmo dot com, obviously also blockstream dot com, and the hat store which is accelion dot com. Have you got any other, things that you would like the listeners to look out for?" }, { "speaker": "guest_2", "time": "48:24", "start": 2904.15, "text": "I think that's it, you know. I try to interact with people, so if you hit me up, I'll, I'll try to respond." }, { "speaker": "stephan_livera", "time": "48:30", "start": 2910.28, "text": "Excellent. Alright, well, thank you again for coming on, Samson. It's been a fascinating conversation. Thanks very much, Stefan. Alright, that was my conversation with Samson. I hope you guys enjoyed it. Just to quickly recap, we discussed the Bitmain IPO, Bitcoin mining centralization, why it's not a good idea to diversify across cryptocurrencies, the over-hyping of blockchain technology, and why Blockstream focuses on Bitcoin. We discussed some Blockstream products such as the cryptocurrency data feed and the Liquid Network, and we also discussed the future outlook in Bitcoin. on topics such as privacy and the coming fee market. Lastly, we discussed Samson's hat sales. So I hope you guys enjoyed it, and if you did, I'd really appreciate a five star review on iTunes or whatever platform you're using to listen to the podcast. otherwise that's it from me. Thanks for listening, and I'll speak to you next time." }, { "speaker": "stephan", "time": "49:26", "start": 2965.89, "text": "Thanks for listening. You can find the show notes on stephanlivera dot com, and please share the podcast on social media." } ] }